Bloomberg News

Oil-Tanker Rates Plunge to Six-Week Low as Vessel Glut Expands

April 03, 2013

Charter rates for the largest oil tankers hauling Middle East crude to Asia reached a six-week low as a surplus of vessels seeking cargoes expanded.

Hire costs for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage slid for a seventh session to 32.13 industry-standard Worldscale points, figures from the London- based Baltic Exchange showed today. That was the lowest level since Feb. 19. Each ship can hold 2 million barrels of crude.

The supply of VLCCs available to load in the Persian Gulf over the next 30 days expanded by 10 to 91, Marex Spectron Group said in an e-mailed report. That compared with 88 ships a month earlier, Marex Spectron data showed. The fleet’s total carrying capacity will rise 5.1 percent this year, above demand growth of 4.9 percent, according to data from Clarkson Plc (CKN), the world’s biggest shipbroker.

“With a glance at the supply side, charterers have no reason to fear any imminent change in the present trend,” shipping and investment-banking company Astrup Fearnley said in an e-mailed report. “Owners, on the other hand, seemed to be willing to chase market rates further down, and new low levels have again been established.”

Daily losses for VLCCs on the benchmark route widened to $4,305 from $3,012 yesterday, according to the exchange. The tankers lost money on the journey for seven weeks through March 14, according to its assessments, which don’t account for owners’ efforts to improve returns by securing cargoes for return voyages or reducing speed to burn less fuel.

Biggest Cost

The price of fuel, or bunkers, the industry’s main expense, was little changed at $633.03 a metric ton, figures compiled by Bloomberg from 25 ports showed.

The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each individual voyage’s flat rate, expressed in dollars a ton, is set once a year. Today’s level means hire costs on the benchmark route are 32.13 percent of the nominal Worldscale rate for that voyage.

The Baltic Dirty Tanker Index, a broader measure of oil- shipping costs that includes vessels smaller than VLCCs, gained 0.2 percent to 659 after five straight declines, according to the exchange.

To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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